Data centers in Germany currently consume around 20 TWh of electricity per year, accounting for approximately 4 percent of the country’s total electricity demand. Driven by the rapid growth of AI applications and the development of increasingly powerful data centers, electricity demand is expected to double in the coming years. The rising demand for grid connection capacity is already causing bottlenecks in many regions and increasing the need for investments in power grids and substations. As a result, battery storage systems (BESS) are getting more and more integrated into data centers. For storage operators, this can offer a significant advantage: access to a grid connection. This article explores the opportunities that arise from this development.
In recent years, the use of BESS to support data center operations has gained increasing attention. One reason is the substantial decline in battery costs, which has significantly improved the economic viability of storage projects.
At the same time, data centers face the challenge of accurately managing and monitoring their load profiles within the electricity grid. “As a result, data centers frequently reserve more grid capacity than they actually require. They are therefore often considered inflexible and can create peak loads that determine both the required connection capacity and the associated costs. The integration of BESS significantly increases flexibility in load management,” adds Dr. Simon Koch, Senior Project Manager BESS at Arcadis Germany. “This is becoming increasingly important in power systems with a growing share of renewable energy sources.”
“The development of new data centers is often slowed down by long waiting times for high-capacity grid connections, which can take many years to become available. Since data centers themselves can be built within just twelve to eighteen months, many operators are turning to microgrids,” says Dr. Kai-Philipp Kairies, Managing Director of ACCURE Battery Intelligence.
In these setups, dedicated on-site power generation is installed alongside the data center, typically consisting of gas turbines, battery storage, and, in some cases, solar power installations. Modern data centers operate with hundreds of thousands of graphics processing units (GPUs). These continuously switch between periods of extremely high computational demand, accompanied by high power consumption, and periods of lower energy use. As a result, electricity demand can fluctuate rapidly and significantly.
“Such load changes can place considerable stress on the power system and would heavily strain or even damage a gas turbine operating without intermediate storage,” explains Dr. Kairies. “The battery storage acts as a buffer between power generation and consumption. It absorbs these fluctuations, stabilizes the power supply, and protects the generation assets.”
In data centers, battery storages are primarily used to bridge short-term power outages lasting a few minutes until backup generators can restore the electricity supply. A complete replacement of the diesel backup generators commonly used today is not yet foreseeable.
“For large-scale backup power applications, storage durations of six hours or more would be required. At the moment, battery systems designed for such long durations remain significantly more expensive than diesel or gas engines and are therefore not yet economically competitive. However, as battery storage costs continue to decline, this could change over the coming years,” says Dr. Koch.
The greatest value of battery energy storage is realized when it is deployed flexibly across multiple applications – not only for backup power or peak shaving, but also as an integral part of active load management. Thus, the deployment of larger battery storage systems that take on additional functions, such as load management or participation in electricity markets (including intraday and ancillary services markets), is currently the subject of extensive discussion, and interest in these applications is growing.
“In practice, however, these considerations are often secondary to the primary objective of connecting data centers to power as quickly as possible. Many current concepts prioritize the fastest route to securing energy supply and, where grid connections are not yet available, continue to rely on conventional solutions based on gas turbines and gas engines. This enables data centers to begin operations before a full grid connection is in place. Even in these scenarios, battery storages remain indispensable because they must provide bridging, stabilization, and load management functions,” explains Dr. Koch.
The economic viability of BESS depends heavily on their storage capacity. While high power output can be provided relatively cost-effectively, costs increase significantly when energy must be stored for longer periods. As a result, stationary battery storage systems today typically provide between two and four hours of storage duration. For backup power during grid outages, diesel generators are therefore still often preferred, as they require less space and can operate almost indefinitely through refuelling.
Because batteries must store their entire energy capacity on-site, large-scale systems require substantial space. In the future, redox flow batteries could offer an alternative, as they also use tank-based storage and can theoretically be refilled. “However, this technology has not yet reached full commercial maturity,” says Dr. Koch.
The biggest challenge in deploying battery storage systems in data centers is not grid connection but the increasing complexity of projects. Data center operators work in a highly specialized environment and possess extensive expertise in their core business. Adding a battery storage system introduces an additional technology domain that requires new knowledge, specialized personnel, or external partners. As a result, many operators question whether the additional effort is justified.
At the same time, new business models are emerging to lower these barriers. Some providers cover the upfront investment costs for battery storage systems and guarantee fixed electricity prices to data center operators over several years. In return, they receive the right to operate the storage system independently and generate revenue through energy market activities such as energy arbitrage. This gives data center operators the advantage of predictable energy costs without having to develop additional expertise for battery storage operations.
Studies such as The Data Center Industry in Norway 2023–2024 and Grids for Data Centres: Ambitious Grid Planning Can Win Europe’s AI Race indicate that many data centers utilize only around 40 to 50 percent of their reserved power capacity on average. In practice, significantly more grid capacity is reserved than is actually used, leaving large amounts of capacity tied up even though it is not continuously required.
One potential solution is to allocate this unused capacity to battery energy storage systems. Data centers already have the necessary grid connections, substations, and supporting infrastructure in place. As a result, battery storage projects could be connected to the grid much faster than standalone developments, since key bottlenecks related to transformers, cable routes, and grid connection approvals have already been addressed.
